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October 28
Hypercom Corp. made its case Tuesday that it can remain successful as an independent company.
The Scottsdale, Ariz., terminal maker said it had record revenue in its third quarter, driven by strong growth abroad, though it still faces an unsolicited takeover bid from its rival VeriFone Systems Inc.
"Quite frankly, we are in the best position that we have ever been in," Philippe Tartavull, Hypercom's chief executive and president, said in a telephone interview. "We have very strong market demand in almost every geography we have."
Hypercom's success comes from its marketing edge over its competition in Europe, Ingenico SA, analysts said. The French company tried to purchase Hypercom in 2008 at $6.25 per share, but withdrew its bid after Hypercom bought Thales' e-Transactions unit.
Industry watchers said one reason for Hypercom's strong third quarter was its ability to catch up with orders it fell behind on in the past.
Hypercom said it was also helped by upticks in its Asian business.
"You also have to remember that some of these regions are vastly underpenetrated," said Michael Saloio, an equity research analyst at Sidoti & Co. LLC. "There is still enough business for everyone."
Hypercom's new "multilane" point of sale terminal is being tested by 10 "tier one" retailers nationwide and will be shipped in the first half of 2011, Tartavull said.
The multilane product is one of Hypercom's strongest bets for business in the U.S., Tartavull said.
All of that, analysts said, does not put the drama of the VeriFone bid, made in September, too far in the rearview mirror.
Although Hypercom dropped litigation that it said prevented the companies from talking publicly about the potential purchase, Hypercom still refused to talk about the possible acquisition this week.
"We will not be making any comments on VeriFone's unsolicited proposal to buy Hypercom," Tartavull said in a conference call with analysts.
Gil B. Luria, a vice president of research at Wedbush Securities, said Hypercom's silence may be a result of pressure from its lawyers.
"The lawyers were driving the show. I think [Hypercom is] very reluctant to get themselves into trouble," Luria said. Assuming a sale to VeriFone might still happen, "you don't want to [anger] your new bosses too much, even though you know you are going to get fired on the next day."
Still, Hypercom's strong performance could discourage the purchase, Luria said.
Hypercom said its net revenue for the three months that ended Sept. 30 rose 23.7%, to $125.1 million, from a year earlier. Its net income rose 275%, to $4.5 million.
By midday Wednesday, Hypercom's stock price was up 10.39%, at $6.48 a share.
That puts Hypercom's stock price above VeriFone's earlier $280 million offer of $5.25 a share.
Douglas Bergeron, VeriFone's chief executive, said other events may have negated the earlier bid. VeriFone recently announced a deal to buy the terminal business of the Dutch card maker Gemalto NV. Bergeron said the acquisition closes the European gap that VeriFone planned to address in a potential Hypercom deal.
"I haven't given a tremendous amount of thought or focus over" Hypercom, Bergeron said, but "at the right price we might be interested."
